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Associated Construction/AP Construction, LLC v. Hanover Insurance Co.

United States District Court, D. Connecticut

August 7, 2018

ASSOCIATED CONSTRUCTION/AP CONSTRUCTION, LLC Plaintiff,
v.
THE HANOVER INSURANCE COMPANY, et al. Defendants.

          Michael P. Shea, U.S.D.J.

         I. Introduction

         This lawsuit arises out of surety bonds issued for a construction project in Stamford, Connecticut. Associated Construction / A.P. Construction, LLC (“Associated Construction”), a construction contractor, alleges that the issuer of the bonds, Hanover Insurance Company (“Hanover” or the “Surety”), and its alleged agents, Scott Adams, Avalon Risk, LLC (“Avalon”), and Lighthouse Management, LLC (“Lighthouse”), failed to perform under the bonds and other related contracts and made misrepresentations in connection with the project. Defendant Adams filed a third-party complaint against Woodrow Baird and Alliant Insurance Services, Inc. (collectively, “Alliant Defendants”) for their alleged role in the issuance of the bonds, seeking indemnification, or in the alternative, contribution on a proportionate basis with regard to all claims brought against Adams by Associated Construction. Now before me is a motion for summary judgment brought by the Alliant Defendants against Adams. (ECF No. 148). For the reasons that follow, the motion is GRANTED IN PART AND DENIED IN PART. The motion is granted with respect to Adams's indemnification and “comparative indemnity” claims. Further, for the reasons explained below, within 14 days of this ruling, Adams shall show cause why I should not grant summary judgment as to the contribution claim on the ground that the Court has yet to issue a judgment against him.

         II. Background

         a. Factual Background

         The following facts, which are taken from the parties' Local Rule 56(a) Statements and the exhibits, are undisputed unless otherwise indicated. Associated Construction “was engaged to construct a residential housing project in Stamford, Connecticut known as Park Square West Phase 2 (‘the project').” (ECF No. 149, Alliant Defendants' Local Rule 56(a)1 Statement (“Def.'s L.R. 56(a)1 Stmt.”) ¶ 1); ECF No. 177-1, Adams's Local Rule 56(a)2 Statement (“Pl.'s L.R. 56(a)2 Stmt.”) ¶ 1.) To facilitate this project, Associated Construction engaged Intext Building Systems, LLC (“Intext”) as a subcontractor to perform certain work. (Def.'s L.R. 56(a)1 Stmt. at ¶ 2; Pl.'s L.R. 56(a)2 Stmt. at ¶ 2.)[1] “As a condition of entering into a subcontract with Intext, [Associated Construction] required that Intext furnish a payment and performance bond to provide assurance that Intext would perform [the work that it had contracted with Associated Construction to provide] and pay for all material and labor incidental thereto.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 3; Pl.'s L.R. 56(a)2 Stmt. at ¶ 3.) “Prior to the instant transaction, [third-party defendant Woodrow] Baird had acted as insurance broker and bonding agent for [Associated Construction].”[2] (Def.'s L.R. 56(a)1 Stmt. at ¶ 5; Pl.'s L.R. 56(a)2 Stmt. At ¶ 5). As such, “Associated [Construction] asked Baird to assist Intext in obtaining the necessary bonds.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 6; Pl.'s L.R. 56(a)2 Stmt. at ¶ 6.)

         Baird “introduced Intext to Adams, ” the president of Avalon, which was an agent of Hanover; Adams operated an “emerging contractors program” that Baird thought might issue bonds to Intext. (Def.'s L.R. 56(a)1 Stmt. at ¶¶ 7-8; Pl.'s 56(a)2 Stmt. at ¶¶ 7-8.) Adams instructed Baird that Avalon “had authority to issue bonds on behalf of Hanover up to a single limit of $2 million and an aggregate limit of $4 million.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 10; Pl.'s L.R. 56(a)1 Stmt. at ¶ 10.) Based upon these limitations, Associated Construction and Intext “agreed to unbundle the subcontract into three separate subcontracts.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 13; Pl.'s L.R. 56(a)2 Stmt. at ¶ 13.) Baird “submitted bond applications on behalf of Intext[3] . . . to Adams.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 14; Pl.'s L.R. 56(a)2 Stmt. at ¶ 14.) Baird “served as the conduit for communication between Intext . . . and Adams, ” and in this capacity “forwarded to Adams . . . from Intext . . . information regarding its financial condition and prior performance of its work.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 15; Pl.'s L.R. 56(a)2 Stmt. at ¶ 15.) Adams does not recall “any specific representations made to him by Baird as to Intext's prior performance of its work” and believed, based upon Baird's forwarding of information from Intext, “that Intext had significant experience in sizeable projects for institutional owners and therefore was competent to perform its job for [Associated Construction].” (Def.'s L.R. 56(a)1 Stmt. at ¶¶ 17-18; Pl.'s L.R. 56(a)2 Stmt. at ¶¶ 17-18.)

         A meeting including Adams, Baird, and various members of Associated Construction management took place on October 9, 2013. (Def.'s L.R. 56(a)1 Stmt. at ¶¶ 24-28; Pl.'s L.R. 56(a)1 Stmt. at ¶¶ 24-28.) Associated Construction later alleged that Adams made a false representation at this meeting “that Hanover would provide three performance bonds which would perform exactly as if a single performance bond had been issued for the entire amount of the subcontract, but [that] Adams could issue the three bonds and achieve the same result.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 23; Pl.'s L.R. 56(a)2 Stmt. at ¶ 23.) Baird, who was present at the meeting, “did not hear Adams state that the three bonds [issued to Intext] would act as one bond.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 24; Pl.'s L.R. 56(a)2 Stmt. at ¶ 24.) Adams could not recall whether Baird “made any statements at the . . . meeting on the subject of whether the three bonds would act as one bond.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 25; Pl.'s L.R. 56(a)2 Stmt. at ¶ 25.) Baird then submitted three bonds to Avalon, and Adams signed the bonds on behalf of Hanover. (Def.'s L.R. 56(a)1 Stmt. at ¶ 29; Pl.'s L.R. Stmt. at ¶ 29.)

         The parties noted above had another meeting on May 8, 2014. (Def.'s L.R. 56(a)1 Stmt. at ¶¶ 32-35; Pl.'s L.R. 56(a)2 Stmt. at ¶¶ 32-35.) Associated Construction later alleged that Adams falsely represented to it at this meeting “that cash flow was not a problem for Intext and that Hanover would support Intext so that Intext would be able to complete [its work for Associated Construction] on schedule.”[4] (Def.'s L.R. 56(a)1 Stmt. at ¶ 31; Pl.'s 56(a)2 Stmt. at ¶ 31.) Baird, who was present at the meeting, “did not hear Adams make the statement alleged by [Associated Construction] to be false.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 32; Pl.'s L.R. 56(a)2 Stmt. at ¶ 32). Adams “does not recall anything that Baird said at the . . . meeting.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 33; Pl.'s L.R. 56(a)2 Stmt. at ¶ 33.)

         b. Associated Construction's Claims Against Adams

         Although the parties dispute the exact characterization of subsequent events, they agree that Associated Construction eventually alleged that it “terminated the subcontracts with Intext on July 15, 2014 and made demand on Hanover to perform under the performance bonds, but Hanover refused.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 39; Pl.'s L.R. 56(a)2 Stmt. at ¶ 39.) Associated Construction also “alleges that as a direct, proximate and foreseeable result of Adams'[s] misrepresentations, which constituted a violation of [the Connecticut Unfair Trade Practices Act (“CUTPA”)], it suffered damages of more than $6 million, including additional expense to complete the [work that it had contracted with Intext for], loss of profit . . . and direct and indirect overhead.” (Def.'s L.R. 56(a)1 Stmt. at ¶ 40; Pl.'s L.R. 56(a)2 Stmt. at ¶ 40.)[5] In its complaint, Associated Construction alleges that Adams's misrepresentations noted above were intentional. (See ECF 150-2, Exhibit A (“Associated Construction's Complaint”) at ¶ 67 (“The conduct alleged [within its CUTPA count against Adams] was intentional.”).) It also sets out a claim of bad faith against Adams predicated upon his alleged misrepresentation at the May 8, 2014 meeting. (See Id. at ¶ 75.)

         c. Third-Party Complaint

         After Associated Construction brought suit, Adams filed a third-party complaint against the Alliant Defendants “seeking indemnification, or in the alternative[], contribution on a proportionate basis with regard to all claims brought against Adams by [Associated Construction].” (See ECF No. 150-3, Exhibit B at 16.) In his third-party complaint, Adams alleges that the Alliant Defendants “were negligent, misrepresented certain facts, breached fiduciary duties, and breached contracts and/or agreement[s], and that such aforementioned acts were the proximate cause of [Associated Construction's] alleged damages and/or losses.” (Id. at 17.) The complaint goes on to note that any liability Adams might have to Associated Construction would “be the direct and proximate result of the active and affirmative conduct on the part [the Alliant Defendants].” (Id.) As such, Adams brings claims against the Alliant Defendants for indemnity, comparative indemnity, and contribution. (Id. at 17-19.) He also seeks a declaratory judgment as to “the rights, responsibilities and obligations of the [Alliant Defendants] as to [Adams's] Third[-]Party Complaint.”[6] (Id. at 19.)

         III. Standard of Review

         Summary judgment is appropriate only when the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “In making that determination, a court must view the evidence in the light most favorable to the opposing party.” Tolan v. Cotton,134 S.Ct. 1861, 1866 (2014) (internal quotation marks omitted). “A fact is material if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) (internal quotation marks omitted). The moving party bears the burden “of showing that no genuine factual dispute exists . . ., and in assessing the record to determine whether there is a genuine issue ...


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